Credit Scores

How to check your credit score (for free), what it means, why it matters,
how to find and fix errors, how to improve your credit rating and much more.

Complete Guide to Credit Scores in Canada


A credit score is three-digit number that help financial institutions gauge a customer’s “credit worthiness,” or how likely they are to pay back their debts on time. The score is used in determining the approval status of customers for a financial product such as a personal loan, line of credit, mortgage, credits card or vehicle financing, and at what rate.

 

Typically ranging between 300 and 900, depending on the scoring number, scores are calculated through a careful analysis of information available that has been made available to credit bureaus based on a range of factors, including debt, bill payment history and credit utilization. The higher the number, the more creditworthy the customer, and thus the more likely they are to qualify for a loan product at a lower interest rate.

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Why does my credit score matter?


Having a higher credit score not only means that financial institutions are more likely to provide loans and other financial products, but they will typically provide those products at lower rates, as they are taking less of a risk when dealing with that customers.

 

Those with higher credit scores therefore enjoy better interest rates and insurance premiums. As a result, credit scores can have a significant impact on not only the availability of financial products, but also their cost. Credit scores also provide a benchmark that measures overall financial wellbeing and responsibility. While a low credit score could limit the availability of financial products like mortgages and loans, a high credit score can make it easier and cheaper to start a business, take out a loan, buy a home or lease a car.

What is my credit score used for?


Lenders and financial institutions—including banks, credit card providers, insurance providers and others—use credit scores to determine their own level of risk when providing a loan to a given customer. They are also used to determine the consumer’s current debt levels and ultimately help them mitigate losses due to bad debt. Low credit scores indicate higher risk to the lender, and are thus more likely to result in application denials and higher premiums.

What is considered a “good” credit score?


Credit scores can range from 300 to 900, though most fall between 399 and 862. Higher numbers indicate stronger credit history and thus less risk to lenders and financial institutions, while lower scores signify the opposite.

Lenders and financially institutions often have their own method for calculating risk profiles and benchmarks, but according to Credit Karma a score of between 300 and 599 is considered poor and qualifies the individual as high risk to lenders. Scores that fall between 600 and 649 are generally considered “fair;” those that fall between 650 and 719 are considered “good;” those that all between 720 and 799 are “very good” and anything above 800 is considered “excellent,” or within the highest tier of credit worthiness, according to most lenders.

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Who can see my credit score?


According to Equifax, one of Canada’s two credit reporting agencies, “Financial institutions, other lenders, and companies with what’s called ‘permissible purpose’ can access a copy of your credit report in order to make certain types of decisions about you.” For example, when a Canadian customer applies for a loan, credit card, mortgage or other financial product the lender typically uses your credit report to determine whether to provide that loan, and at what rate. Equifax also provides a few examples of what constitutes “permissible purpose.”

 

  1. In accordance with written instructions from a consumer to whom the file relates
  2. In connection with a payment that has gone to a collections agency
  3. For employment purposes with the consumer’s written consent
  4. To underwrite of insurance for personal, family or household purposes
  5. To determine a consumer’s eligibility for certain governmental benefits
  6. When requested by a court order or any Canadian law enforcement agency for an investigation or prosecution
  7. In connection with a legitimate business need relating to a transaction initiated by the consumer
  8. To review an account to determine whether the consumer continues to meet the terms of the account

 

Organizations that typically meet permissible purpose requirements include credit providers, collection agencies and insurance companies, who can see your credit report without your permission. Employers, landlords, rental companies, telecommunications and utility providers can also view your credits score, but only if you explicitly grant them permission.

Who can’t see my credit score?


Individuals—such as friends, neighbours, coworkers or other family members—are not able to access your credit score unless you provide authorization and they have “permissible purpose.” Not even your spouse is able to view your credit score unless they have been given explicit permission and can prove the situation qualifies under the permissible purpose requirements.

 

Furthermore, anyone that receives a copy of your credit score is permanently listed under the “inquiries” section of your report, allowing Canadians to verify who has and has not been granted access to their file.

 

“If you learn that your Equifax credit report has been obtained outside of the reasons outlined by provincial and federal laws, please contact the company that made the inquiry to investigate,” instructs the Equifax Canada website.

How do I get a copy of my credit report by mail?


Canada’s two credit reporting agencies, Equifax and TransUnion, provide numerous ways for consumers to receive a credit report, though they may not include their credit score. While Equifax Canada refers to your credit report as a “credit file disclosure,” TransUnion uses the term “consumer disclosure.” Both reports are available for free by mail or fax upon completion and submission of this request form for Equifax reports or this request form for TransUnion reports.  

 

Canadians can also call Equifax Canada at 1-800-465-7166 or TransUnion Canada at 1-800-663-9980 (or 1-877-713-3393 for residents of Quebec) and provide the necessary information to receive their credit report by mail. Be sure to have your social insurance number and credit card handy to confirm your identity before calling.

How can I view my credit score for free online?


In order to get instant access to your credit score online Equifax offers plans starting at $16.95 per month while TransUnion charges customers a monthly fee of $19.95. There are, however, a number of third party service providers that offer Canadians access to their credit score online in minutes at absolutely no cost. For example, Borrowell, Credit Karma and Mogo offer Canadians free online access to their Equifax report.  

 

Third party providers typically require users to register an account and provide some personal information in exchange for covering fees to the credit agencies, and earn their revenue by offering customers access to loan products, financial advice and other services. Registering an account typically takes less than five minutes.

 

While credit checks conducted by lenders and financial institutions impact credit scores, checking your own credit score via a third party provider has no effect.

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Should I check both Equifax and TransUnion scores?


Canada’s two credit reporting agencies work independently and calculate credit scores differently based on the unique information at their disposal. These scores are often different, as not every financial institution, lender or creditor reports information to both. For example, while American Express, RBC and Scotiabank report customer credit information to TransUnion, while BMO, CIBC and TD Canada Trust use Equifax.

 

Even when they do receive the same information, the two don’t always calculate credit scores the same way.As a result, consumers might be looking at different credit scores than their lender or creditor, which can lead to disputes and confusion. Whenever possible, Canadians should ask lenders, utility providers, landlords or others that require a credit score to confirm which bureau their consulting to avoid any disputes. Furthermore, Canadians looking to improve their credit should be sure both are acknowledging those efforts.

Do businesses have credit scores too?


If you are a business owner (large or small), you can check your business credit report through Equifax.

Business credit rating is separate from your personal credit rating, as it gives a potential creditor information on your business financial performance and history. The business credits core becomes a factor if you are considering looking for capital, such as a business loan, business line of credit or credit card.

Most lenders will take both the business credit history and your personal credit history when deciding if a loan request should be approved or declined.

 

If you want to find out the credit rating of your business, head over to Equifax here.

What is the difference between a “hard” and “soft” credit check?


In simple terms, a hard credit check is one that impacts credit scores, and a soft check does not. In most cases checking your own credit score has no impact on the score itself—especially if you go through third party providers like Mogo, Borrowell and Credit Karma—but when creditors or lenders consider providing a loan the check is recorded in your credit report and could ultimately impact your score. In fact, hard inquiries can stay on your credit report for three to six years, according to Credit Karma, while soft inquiries are only visible to you and the entity that made the request.

 

It’s therefore important to ask anyone that will be checking your credit score how the inquiry will be recorded (and to carefully consider the consequences) before providing permission to allow that check to happen. In most cases job, insurance, home and auto rental applications register as soft checks and thus won’t impact credit scores, according to TransUnion. The credit bureau also confirms that credit scores aren’t impacted when “a credit grantor has verified your identity for the purpose of offering you credit” and when “a credit grantor with whom you have a business relationship has reviewed your account with them.”

Equifax, on the other hand, confirms that it generally counts multiple inquiries for the same product type—such as multiple mortgage or auto loan inquiries—as a single inquire. In other words, you can shop around for the best loan rate without worrying that each inquiry will make its own impression on your credit score, so long as it falls within a specific window of time. That window, however, could vary between 14 and 45 days, depending on the credit-scoring model. The exception also does not apply for multiple credit card applications in the same timeframe.

How much does a hard credit check affect my credit score?


The potential impact of a hard credit check will range depending on the individual and their credit history. The more information you have on file in your credit history, the more diluted the impact of the credit check will be. If your credit history is brief, however, a single check will have more of an impact. Generally speaking a single credit check isn’t enough to make a significant impact on its own, but Canadians should always avoid hard checks whenever possible to minimize the potential damage.  

What are the factors that impact my credit score?


According to Mogo, there are five factors that impact credit scores to varying degrees; 35% of the score is based on not missing payments, 30% is based on utilization ratio, 15% is based on length and types of credit, 10% is based on inquiries and the remaining 10% is based on collections.

  • Inquiries

    As mentioned in previous sections, hard credit checks have an adverse impact on credit scores. The less of those on file, the better.

  • Payment History

    Payment history refers to whether or not the user pays their bills on time. Mogo warns that in some instances missing a $4 payment can be as impactful as missing a $400 payment, as they register the same way on the credit report. They add that it is therefore important to always pay at least the minimum payment for each bill, no matter the amount. Borrowell also recommends setting up automatic payment reminders to ensure on time payments.

  • Utilization Ratio

    Utilization ratio refers to how much of the available debt you’re actually using. Mogo recommends keeping a balance of less than 35% of the credit limit, and never going over 70% utilization of available credit, even if you’re paying your bills on time every month. In other words, it’s better for your score to utilize $1000 from a credit card with a limit of $3000 than it is to utilize $500 from a credit card with a $1000 limit.

  • Length of Credit

    The more credit history you have, the easier it is for lenders to trust you. Having a strong record of paying back your debts and your bills is more impactful the further back that history goes.

  • Types of Credit

    Lenders and financial institutions reward customers for having a range of different types of credit rather than just one. Mogo also warns that credit cards and lines of credit are considered less preferable to personal loans when it comes to determining credit scores.

How do I improve my credit score?


Some of the factors that impact credit scores are out of the control of the individual, but Borrowell recommends two ways Canadians can proactively improve their score. The first is ensuring all bills are paid on time, and setting up pre-authorized payments whenever possible, especially for bills paid to companies that report to the credit bureau (such as mortgages, utilities, insurance, student loans, auto loans and credit cards). The other is to stay on top of credit utilization, and to be aware of the impact it has on credit history. In some cases, increasing credit limit can help improve credit utilization, and if that’s not an option reaching for a debit card, cash or cheque instead of a credit card can also have a significant impact over the long run.

 

Beyond paying bills on time and being aware of credit utilization, TransUnion also recommends avoiding new credit card accounts whenever possible. They also recommend alerting banks and credit card companies when you move to ensure you’re not being penalized for missing bills you never received. Furthermore, TransUnion recommends staying vigilant by checking online accounts regularly (rather than receiving a surprise in the mail at the end of the month) and to look out for inaccuracies. “The credit reporting agencies make it easy for you to dispute these inaccuracies,” they advise. “And remember, credit bureaus are just the messengers—it’s up to you to let them know one of your creditors reported inaccurate information.”

What is credit monitoring?


Credit monitoring is an ongoing service that reports any activity that might impact credit scores. Once only available for a monthly fee through a financial institution, credit bureaus or credit card providers, new online companies — including Borrowell and Credit Karma — offer the service for free. Credit Monitoring is ideal for those looking to improve their credit score, as it helps them track progress over time and stay on top of factors that might be having an impact on their score.  

Credit Monitoring can even help prevent against fraud and identity theft, according to the Government of Canada. “You could consider using this service if you think you’ve been the victim of fraud or if you have been affected by a data breach,” recommends an article on the Canada.ca website. “This can help you see if somebody is trying to apply for credit in your name.”

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What is the difference between a credit score and a credit report?


According to TransUnion, credit reports provide an overview of pertinent credit history, such as the accounts that have been opened and closed, payment history, debt history and amount currently owing. Credit scores, on the other hand, turn those data points into a simple and widely understood three-digit number. While TransUnion and Equifax offer Canadians free access to their credit report online, credit scores can only be accessed via mail, for a monthly fee or through a third party provider.

 

Furthermore, Canadians should also be on the lookout for any negative information that has remained on their account past the maximum number of years it’s allowed to be there. The agency also warns Canadians to check for any accounts they never opened or requests they never made, such as requests for credit cards or lines of credit they didn’t actually apply for, as it could be a sign of identity theft.

What errors should I watch out for on my credit report?


According to the Financial Consumer Agency of Canada, Canadians should be on the lookout for errors on their credit report, as it could have a significant and adverse impact on their financial future. Upon receiving a credit report consumers should ensure all of the personal information is correct, such as date of birth and address. They should also look for errors in their accounts, such as payments that were made on time but were reported as late.

 

Furthermore, Canadians should also be on the lookout for any negative information that has remained on their account past the maximum number of years it’s allowed to be there. The agency also warns Canadians to check for any accounts they never opened or requests they never made, such as requests for credit cards or lines of credit they didn’t actually apply for, as it could be a sign of identity theft.

What do I do if there are errors on my credit report?


If you see something on your credit report that looks suspicious or incorrect, the Financial Consumer Agency of Canada recommends contacting lenders to inquire about the mistake. If they identify the error as fraud rather than an administrative error the agency recommends informing Equifax and TransUnion as soon as possible, and instructing them to put a fraud alert on your credit report and report it to the Canadian Anti-Fraud Centre.  

 

If the mistake is an error and not a potential fraud case the agency assures Canadians that they have the legal right to dispute inaccurate information in their credit report, and it’s often the credit bureau’s responsibility to correct the error for free. They provide this five-step process for fixing any errors that appear in your credit report:

Step 1: Support your case

Gather receipts, statements and other documents related to your credit accounts in order to prove your claim

Step 2: Contact the credit bureaus

Equifax Canada and TransUnion Canada provide forms that you can download from their websites and submit by mail to request an error correction or information update. After submitting a completed form the bureau will initiate an investigation into the claim, and will update your report if they determine there was an error.

Step 3: Contact the creditor

According to the Financial Consumer Agency of Canada you may be able to speed up the process by contacting the creditor or financial institution associated with the error yourself. Ask them to verify their files and provide the credit bureaus with updated information.

Step 4: Escalate your case

If you’re not satisfied with the results of the investigation you have the right to ask to speak with someone at a higher level at the credit bureau or at your financial institution.

Step 5: Add a consumer statement

If the credit bureau still says the information you believe to be incorrect is accurate you can submit a brief statement to attached to your credit report explaining your position at no additional cost. TransUnion lets you add a statement of up to 100 words (200 words in Saskatchewan) while Equifax lets you add a statement of up to 400 characters. It won’t change the information in your report itself, but those who view your credit report can at least take your position into consideration when making decisions about your account.

How long does information stay on my credit report?


The length of time that information remains in your credit report varies based on the nature of the information, the credit bureau and your province of residence, as well as other factors. Generally speaking, negative information like missed payments, bounced cheques or accounts that were sent to collection agencies stay on your credit report for up to 6 years, according to the Financial Consumer Agency of Canada. Positive information, however, can stay in your credit report for longer.

 

Consumer proposals remain on Equifax reports for 3 years after all debts have been paid off, while TransUnion removes them either 3 years after all debts have been paid off or 6 years after signing the proposal, whichever comes first.

 

According to the Financial Consumer Agency bankruptcies generally remain on both accounts for 6 years after the date of discharge, although TransUnion removes bankruptcies from credit reports after 7 years for those discharged in New Brunswick, Newfoundland, Ontario, Prince Edward Island and Quebec.

A better credit score means easier approval for loans


Whether you are looking for a small amount of extra funds or preparing to buy a home and looking for a mortgage, your credit rating will come into play. Lenders will likely do a credit check to see your past history in order to qualify you for a loan. Without cost effective access to credit, it is very difficult to save money, since the high interest rates can dig into any income left after all expenses are paid for. At Smarter Loans you can find Canada’s most reputable financing providers, and compare all options available to you. Check out the full table and select a loan type to see providers for that category. 

Company
Amount
Interest Rate
Reviews
Terms
$500 - $20,000
19.99% - 46.8%
6 - 60 Months
$500 - $35,000
5.9% - 39.9%
12 - 60 Months
$500 - $35,000
19.99% - 46.96%
9 - 120 Months
$500 - $30,000
19.99% - 39.99%
6 - 120 Months
$1,500 - $12,500
19.99% - 34.99%
12 - 60 Months
$100 - $15,000
46.93%
12 - 60 Months
$500 - $10,000
12.99% - 39.99%
9 - 36 Months
$500 - $10,000
19.99% - 46.99%
12 - 36 Months
$2,000 - $10,000
34.9% - 43%
12 - 60 Months
$100 – $15,000
19.99% - 46.93%
Open Line of Credit
$500 - $10,000
46.93%
Open Line of Credit
$2,000 - $10,000
18.9% to 54.9%
12 - 60 Months
$1,000 - $35,000
5.6% - 25.5%
36 - 60 Months
Company
Amount
Interest Rate
Reviews
Terms
$5,000 - $100,000
Starting at 29%
4 - 6 months
$5,000 - $100,000
Starting at 6.87%
3 - 18 Months
$5,000 - $250,000
Starting at 9%
3 - 18 months
$10,000 - $300,000
Starting at 6.99%
4 - 18 Months
$4,000 - $300,000
5.49% - 22.79%
6 - 60 Months
$1,000 - $1,000,000
6% - 25%
3 - 24 Months
$5,000 - $250,000
Starting at 9.99%
6 - 24 Months
$5,000 - $150,000
8.99% - 18.99%
3 - 24 Months
$5000 - $500,000
12.99% - 39.99%
6 - 18 Months
$5,000 - $100,000
Starting at 15%
12 - 18 Months
$5,000 – $500,000
Starting at 5.9%
3 – 60 Months
Company
Amount
Interest Rate
Reviews
Terms
$100 - $15,000
46.93%
12 - 60 Months
$100 - $1,500
Varies
Up to 2 months
$100 - $1,500
Varies by Province
Up to 62 days
Company
Amount
Interest Rate
Reviews
Terms
$3,500 - $49,500
8.99% - 29.5%
12 - 84 Months
$5,000 - $40,000
Starting at 2.9%
12 - 72 Months
Company
Amount
Interest Rate
Reviews
Terms
$50,000 and Up
Varies
Varies
$10,000 and up
Varies
12 Months
Varies
Starting at 2.90%
Varies
$50,000 - Unlimited
Varies
Varies
$10,000 - $25,000
Varies
12 - 60 months
Company
Amount
Interest Rate
Reviews
Terms
$1,000 - $1,000,000
6% - 25%
3 - 24 Months
$50,000 - Unlimited
Varies
Varies
$5,000 And Up
4.9% - 24.99%
18 - 84 Months
Company
Amount
Interest Rate
Reviews
Terms
$1,000 - $1,000,000
6% - 25%
3 - 24 Months
$50,000 - Unlimited
Varies
Varies
$5,000 And Up
4.9% - 24.99%
18 - 84 Months
Company
Amount
Interest Rate
Reviews
Terms
$1,000 - $1,000,000
6% - 25%
3 - 24 Months
$50,000 - Unlimited
Varies
Varies
$5,000 And Up
4.9% - 24.99%
18 - 84 Months
Company
Amount
Interest Rate
Reviews
Terms
$1,000 - $1,000,000
6% - 25%
3 - 24 Months
$50,000 - Unlimited
Varies
Varies
$5,000 And Up
4.9% - 24.99%
18 - 84 Months
Company
Amount
Interest Rate
Reviews
Terms
$5,000 And Up
4.9% - 24.99%
18 - 84 Months
Company
Amount
Interest Rate
Reviews
Terms
$10,000 and up
Varies
12 Months
$500 - $35,000
19.99% - 46.96%
9 - 120 Months
$500 - $30,000
19.99% - 39.99%
6 - 120 Months
$50,000 - Unlimited
Varies
Varies
$350 - $25,000
Varies
12 - 60 months
Company
Amount
Interest Rate
Reviews
Terms
$500 - $10,000
19.99% - 46.99%
12 - 36 Months
$350 - $25,000
Varies
12 - 60 months
Company
Amount
Interest Rate
Reviews
Terms
$10,000 and up
Varies
12 Months
$500 - $35,000
19.99% - 46.96%
9 - 120 Months
$500 - $30,000
19.99% - 39.99%
6 - 120 Months
$350 - $25,000
Varies
12 - 60 months
Company
Amount
Interest Rate
Reviews
Terms
$4,000 - $300,000
5.49% - 22.79%
6 - 60 Months
$5,000 - $100,000
Starting at 15%
12 - 18 Months
Company
Amount
Interest Rate
Reviews
Terms
$500 - $20,000
19.99% - 46.8%
6 - 60 Months
$500 - $35,000
5.9% - 39.9%
12 - 60 Months
$500 - $30,000
19.99% - 39.99%
6 - 120 Months
$1,500 - $12,500
19.99% - 34.99%
12 - 60 Months
$500 - $10,000
12.99% - 39.99%
9 - 36 Months
$500 - $10,000
19.99% - 46.99%
12 - 36 Months
$2,000 - $10,000
34.9% - 43%
12 - 60 Months
$2,000 - $10,000
18.9% to 54.9%
12 - 60 Months
$1,000 - $35,000
5.6% - 25.5%
36 - 60 Months
Company
Amount
Interest Rate
Reviews
Terms
$10,000 and up
Varies
12 Months
$500 - $35,000
19.99% - 46.96%
9 - 120 Months
Up to $15,000
19.99% - 24.99%
Up to 84 Months
$1,600 - $10,000
7.26% - 29.95%
36 - 60 Months
$1,500 - $2,500
15.99%
24 - 36 Months

About The Author:


Jared Lindzon is an experienced journalist, writer and public speaker. He specializes in Business, Technology, Lending and FinTech industries in Canada and abroad. Jared is a regular contributor to Smarter Loans and top tier publications around the World, including Fortune Magazine, Fast Company, the Guardian, Rolling Stone, the Globe and Mail, and many more.